Government Wants More Power

I KNOW. So what else is new? The Obama admininistration “will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies” in their overhaul of financial regulation, according to Stephen Labaton at The New York Times. Some of its ideas aren’t too bad.

It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated.

There will be new powers for the Federal Reserve to supervise and seize institutions. And of course, supervision of executive pay. That’s a natural for a politician. There’s nothing more delightful for a man disposing of billions of dollars in taxes than to browbeat a man who only makes millions.

As usual, these progressive power addicts miss the point. The point is to reform the financial system so it doesn’t need close supervision, so that troubled financial firms wouldn’t threaten the whole system.

We know how to do this. It is pretty simple. We lower the leverage ratios of financial institutions. You see, this isn’t that hard. A company can’t get into trouble unless it has high debt. If its capital is mostly equity then a reduction in earnings isn’t the end of the world.

That’s on the financial supply end. On the demand side we could limit the amount of debt that consumers could carry and reform the system so that it features more equity. For instance, instead of an 80 percent mortgage, a homeowner could take out a 50 percent mortgage and finance the rest with an equity partnership.

But don’’t look for liberals to reform the financial system to make it less risky. That’s not the way of the liberal.

What liberals want is power. They want to boss around the financial industry and they want to convert its resources to support their own project of power and patronage.

So look for our liberal friends to crank up the leverage and crank up the political supervision of the private sector. That way they benefit twice. They benefit because a highly leveraged financial industry is susceptible to failure, and when the financial system fails, liberals win. And they get to extract tribute out of the industry because of the power they have over it.

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Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

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Faith & Purpose

“When we began first to preach these things, the people appeared as awakened from the sleep of ages—they seemed to see for the first time that they were responsible beings...”
Finke, Stark, The Churching of America, 1776-1990

Mutual Aid

In 1911... at least nine million of the 12 million covered by national insurance were already members of voluntary sick pay schemes. A similar proportion were also eligible for medical care.
Green, Reinventing Civil Society

Education

“We have met with families in which for weeks together, not an article of sustenance but potatoes had been used; yet for every child the hard-earned sum was provided to send them to school.”
E. G. West, Education and the State

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Law being too tenuous to rely upon in [Ulster and the Scottish borderlands], people developed patterns of settling differences by personal fighting and family feuds.
Thomas Sowell, Conquests and Cultures

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The primary thing to keep in mind about German and Russian thought since 1800 is that it takes for granted that the Cartesian, Lockean or Humean scientific and philosophical conception of man and nature... has been shown by indisputable evidence to be inadequate.
F.S.C. Northrop, The Meeting of East and West

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Inquiry does not start unless there is a problem... It is the problem and its characteristics revealed by analysis which guides one first to the relevant facts and then, once the relevant facts are known, to the relevant hypotheses.
F.S.C. Northrop, The Logic of the Sciences and the Humanities

Chappies

“But I saw a man yesterday who knows a fellow who had it from a chappie that said that Urquhart had been dipping himself a bit recklessly off the deep end.” —Freddy Arbuthnot
Dorothy L. Sayers, Strong Poison

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I mean three systems in one: a predominantly market economy; a polity respectful of the rights of the individual to life, liberty, and the pursuit of happiness; and a system of cultural institutions moved by ideals of liberty and justice for all. In short, three dynamic and converging systems functioning as one: a democratic polity, an economy based on markets and incentives, and a moral-cultural system which is plural and, in the largest sense, liberal.
Michael Novak, The Spirit of Democratic Capitalism

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The incentive that impels a man to act is always some uneasiness... But to make a man act [he must have] the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness.
Ludwig von Mises, Human Action

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[In the] higher Christian churches� they saunter through the liturgy like Mohawks along a string of scaffolding who have long since forgotten their danger. If God were to blast such a service to bits, the congregation would be, I believe, genuinely shocked. But in the low churches you expect it every minute.
Annie Dillard, Holy the Firm

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“When we received Christ,” Phil added, “all of a sudden we now had a rule book to go by, and when we had problems the preacher was right there to give us the answers.”
James M. Ault, Jr., Spirit and Flesh

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The recognition and integration of extralegal property rights [in the Homestead Act] was a key element in the United States becoming the most important market economy and producer of capital in the world.
Hernando de Soto, The Mystery of Capital

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